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November 22, 2008 12:17:50 PM CST

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Better Than a Bailout: Boost FDIC Coverage to $1M

Posted Oct 1, 08 10:17 CDT in Business 

(Newser) – Congress should stop fighting over the Paulson bailout, writes BusinessWeek economist Michael Mandel, and approve an expansion of FDIC deposit insurance to $1 million. It should also triple deposit insurance reserves to $145 billion. It would solve the immediate problem, calming the hysteria in the market, and attract funds to banks, he argues, and give Congress time to decide whether banks, and the housing market, still need federal support.

It’s an augmentation of an existing program likely to be greeted with open arms by both parties—and even by Wall Street, which once fought it as unfair to investment banks, Mandel says. Now, those investment banks are all but extinct. The expansion would calm Americans' nerves and avert a run on commercial banks.

Source BusinessWeek

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Federal Deposit Insurance Corp. (FDIC) Chairwoman Sheila Bair listens to a question on Capitol Hill in Washington.   (AP Photo/Haraz N. Ghanbari)
Customers complain about waiting in line outside IndyMac Bank, Tuesday July 15, 2008, in Encino, Calif.   (AP Photo/Nick Ut)
Treasury Secretary Henry Paulson walks out of the West Wing of the White House after his meeting with President Bush.   (AP Photo/Pablo Martinez Monsivais)
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Expanding deposit insurance would solve the immediate problem. It would attract more funds to the banks, which would then have more money to lend. And it would calm down the note of hysteria that hit last week. - Michael Mandel

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Financial Crisis • Henry Paulson • FDIC • banking industry • investment banks • Sheila Bair • commercial banks


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